The Biggest TV Network You've Never Heard Of

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The debate does not seem to be of great concern to PRN's biggest client, Wal-Mart -- perhaps because it splits the ad revenue with PRN and therefore benefits as much from the advertising's quantity as its effectiveness. "For Wal-Mart, it's a profit center," says Phil Lempert, the editor of Xtreme Retail23, a retail technology magazine. "It doesn't matter if anyone's watching."

Each fall, the retail giant runs an ad sales event at its Bentonville, Ark., headquarters where, alongside PRN representatives, Wal-Mart execs like Michael T. Duke, president of the Wal-Mart stores division, present the network to advertisers eager to please the retailing behemoth. "Wal-Mart has a unique position in its ability to insist, or strongly encourage, the advertisers to participate," says Virginia Cargill, CEO of SignStorey, an in-store network that sometimes works with PRN. A typical advertiser is Nintendo, which spends more than $1 million a year on Wal-Mart TV in part to keep Wal-Mart happy. "They're very positive on the network," says John Moore, director of channel marketing at Nintendo. "And we're very positive about the amount of business we're doing with them."

Though he cannot point to a major supplier that does not advertise, Troy Steiner, Wal-Mart's senior director of media, denies that Wal-Mart coerces advertisers. Wal-Mart's policy, he says, is, "if they want to participate, great; if they don't, it's up to them." He also says that Wal-Mart's split of the ad revenue is poured back into expanding the network.

In March, PRN's contract with Wal-mart expired. In April, after much negotiating, they quietly inked a new deal. As this story went to press, PRN would only confirm that it had signed; Wal-Mart would not allow it to say more. Nor would Wal-Mart's Steiner comment on PRN's new agreement with his famously hard-bargaining employer except to say there were "no big changes" from the previous deal. With Wal-Mart continuing to add stores, PRN's dependence on its largest client is likely to remain high. But in Nooney's view, this is a good problem: "If we didn't have them, you'd be asking, 'How will you get Wal-Mart as a customer?"

Today, PRN, with more than 210 employees, is by far the largest player in an industry where building a competitor from scratch would be prohibitively expensive. Nooney says the company is still considering an IPO but that the market has been poor and, being profitable, the company does not need the cash to survive. (The overwhelming dependence on Wal-Mart could also give investors pause.) Besides, as of recently, the company professed to have plenty of money for near-term expansion.

Noting that every store has checkout lines, Nooney paid $2.4 million in 2003 to buy Impli, a company that had screens up in the checkout lines of 100 Ralphs supermarkets around Los Angeles. PRN has since added Pathmark, ShopRite, and Albertson's to the channel, which is designed to lower the "perceived wait time" by amusing customers. It has the added bonus of letting PRN and the retailers sell local and regional ads for products outside the store, such as mobile phones, real estate, and automobiles.

PRN is also building its ability to "microtarget" its ads and offer up-to-the-minute programming. It's upgrading Wal-Mart TV by replacing the old CRT TVs with 42-inch flat-screens and adding eye-level sets in high-traffic "dwell" areas such as the banana table in Wal-Mart Superstores. And there are now seven different channels in Wal-Mart, including a pharmacy channel that weaves ads with health tips from the Discovery Health channel; the ads can be aimed at specific regions, stores, and beyond. "We can sell you snow shovels in Minnesota while we're selling you raincoats in Tampa and suntan lotion in Hawaii," Nooney says. "We can actually program a single screen in a single store.

"This reminds me of the cable business in the early days," he continues, "where we were building an industry where there was skepticism and it continued to grow until we reached a tipping point. We're entering a different world, where advertising isn't confined to sitting on your couch or the radio in your car. Advertising will become more contextual in your everyday life. Everything's in play."

Ian Mount wrote about David Steinberg and InPhonic in the March issue.

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